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U.S. yields fall from highs after mixed jobs report

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NEW YORK — Yields of short-term U.S.

Treasuries fell from multiyear highs on Friday after a closely

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watched employment report showed unemployment rising and job

growth slowing in August, as many on Wall Street had expected.

Nonfarm payrolls increased by 315,000 jobs last month, down

from a surging 526,000 in July, the Labor Department said. The

unemployment rate increased to 3.7% from a pre-pandemic low of

3.5% in July.

Economists polled by Reuters had forecast payrolls

increasing 300,000. Estimates ranged from as low as 75,000 to as

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high as 450,000.

The jobs data came a week after Federal Reserve Chair Jerome

Powell said the U.S. economy may face a painful period of slow

economic growth and rising unemployment as the central bank

continues an aggressive pace of interest rate hikes to curtail

inflation, which is running near 40-year highs.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, was down 11.8

basis points at 3.404% after hitting 15-year highs the day

before.

The yield on 10-year Treasury notes was down 6.6

basis points to 3.199%, one day after hitting two-month intraday

highs, while the yield on the 30-year Treasury bond

was down 2.7 basis points to 3.347%.

“The basic message is the labor market might be starting to

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cool and the Fed might not have to move so aggressively,” said

David Page, head of macroeconomic research at Axa Investment

Managers.

Market participants now expect a 58% probability that the

Fed will raise benchmark rates by 75 basis points at its meeting

on Sept. 21, down from a 75% chance a day ago, according to

CME’s FedWatch tool. Expectations for a 50 basis

points increase are now up to 42% from 25% on Thursday.

The gains in the job market in August will likely keep the

Fed on its current path, said Rick Rieder, chief investment

officer of global fixed income at BlackRock.

“The door is still wide open for the Fed to keep moving, and

we also think this keeps the potential for a 75-bps hike at the

September meeting still on the table,” he said.

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A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was at -20.5 basis points.

September 2 Friday 2:49PM New York / 1849 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 2.8475 2.9068 -0.047

Six-month bills 3.2525 3.3513 -0.022

Two-year note 99-182/256 3.4017 -0.120

Three-year note 99-32/256 3.4399 -0.109

Five-year note 99-48/256 3.3031 -0.107

Seven-year note 99 3.2864 -0.087

10-year note 96-52/256 3.1988 -0.066

20-year bond 96-136/256 3.6206 -0.029

30-year bond 93-120/256 3.347 -0.027

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 36.25 1.00

spread

U.S. 3-year dollar swap 14.25 0.50

spread

U.S. 5-year dollar swap 7.25 0.50

spread

U.S. 10-year dollar swap 9.00 0.25

spread

U.S. 30-year dollar swap -29.50 -0.25

spread

(Reporting by David Randall; Editing by Andrea Ricci, Mike

Harrison and Jonathan Oatis)

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